Yea but devices like this running Android will be a different story. I feel Android WILL be a serious threat.
In reality though it will just make Apple more competitive
Seeing as Apple is ahead in the 2 product cycles (or even >1 cycle ahead), it's Apple's move first. Android may come either before v3 iPhone, or just after it, but it's Apple's 1st move to make. If you've seen the Android videos on youtube on Google's account there, you'll see that they have some interesting ideas - the interface is a little laggy, but it was running on a HTC i think, (which can be laggy). If applications can port between Android and iPhone platforms, there might be a larger pool of apps coming out, and whilst we may want Apple to sock it to them, Android will provide useful competition. (Making smartphones more affordable, more mainstream, bringing in the possibility of competition might help keep app costs lower etc.
It'll bring money to the developers hopefully, and they bring the apps. Apple does a few things, well. Hopefully one of them soon, is to get Developers to make a shed load of apps for the iPhone. Once developers learn about the iPhone SDK, you can bet your Mighty Mouse that Apple will leverage that so that they can then start doing developing for the Apple TV, widgets, non-iPhone programs etc.
When other companies talk about iPhone or iPod killers, they usually don't talk about which version they're slaying
Those flashy transitions can make the pause between swapping apps more/less noticeable!